Here's why Delta (DAL) earnings are a litmus test for airline stocks

When an entire industry is under pressure, investors can only hope one player delivers results strong enough to lift the rest of the pack.

For the battered U.S. airline industry, that boost came Thursday from Delta Air Lines (DAL), which reported earnings that surprised to the upside.

Just as importantly, Delta reinstated its full-year guidance after yanking it in April due to what CEO Ed Bastian described as "uncharted, unprecedented uncertainty" due to Trump’s tariff blitz.

Delta’s report showed premium ticket revenue rose 5% year-over-year, and loyalty program revenue jumped 8% even as revenue from standard cabins slipped. The company also said bookings had stabilized.

The stock surged 12% on the report but is still 4% down this year.

Wall Street jumps aboard

Delta’s upbeat results set off a wave of buying across the airline sector.

United Airlines (UAL) stock jumped 14% on Thursday, American Airlines (AAL) gained 12.7%, Alaska Air (ALK) rose 9%, and Southwest Airlines (LUV) added 8%.

“Delta’s solid earnings gave the market a bright green light to pile back into the space — and investors duly obliged,” Morgan Stanley analysts wrote in a note.

Falling oil prices helped too. Delta reported fuel costs fell 11% year-over-year in Q2, with per-gallon prices down 14% from last year.

The reinstatement of Delta’s full-year outlook also sent a strong signal to markets that the worst may be over for the industry.

“Reflecting our confidence in the business, we are restoring financial guidance with an expectation for earnings per share of $5.25 to $6.25 and free cash flow of $3 to $4 billion, consistent with our long-term free cash flow targets,” Bastian said.